American Tire Distributors announces major restructuring through stalking horse agreement

American Tire Distributors, Inc. (ATD), a leading supplier in the replacement tire market, has entered a stalking horse agreement as part of its broader strategy to restructure operations and reduce debt. This asset purchase agreement (APA) is supported by a consortium of prepetition lenders, including Guggenheim Partners Investment Management, LLC, KKR, Monarch Alternative Capital LP, Sculptor Capital Management, Inc., and Silver Point Capital, L.P.

Under the asset purchase agreement, substantially all of ATD’s assets are slated for acquisition via a credit bid on its funded debt, coupled with the assumption of trade payables and other liabilities. The transaction is expected to reduce the company’s debt burden by $1.3 billion, improving its financial flexibility. While the deal sets the stage for restructuring long-term success, it is subject to a competitive sale process in accordance with Section 363 of the U.S. Bankruptcy Code.

Restructuring aims to strengthen operational stability

ATD operates over 115 distribution centres and serves approximately 80,000 customers across the United States, employing a workforce of 4,500 associates. As a leader in the replacement tire market, the company focuses on offering an extensive inventory, frequent deliveries, and value-added services to manufacturers and service providers.

Jim Bienias, Chief Restructuring Officer of ATD and a Managing Director at AlixPartners, emphasized that the stalking horse agreement represents a significant step toward ensuring the company’s long-term success. He acknowledged the unwavering support from stakeholders, including lenders, partners, and employees, during the restructuring process.

Bienias also expressed optimism regarding the future, noting that ATD is committed to maintaining its operations and supporting its customer base throughout this transition.

Competitive sale process underway

The competitive sale process tied to the stalking horse agreement establishes a baseline value for ATD’s assets. However, the final outcome will be determined through court-supervised bidding. The U.S. Bankruptcy Court approved the bidding procedures on November 26, 2024, paving the way for potential higher offers from interested parties.

Throughout the competitive sale process, ATD will continue normal operations to ensure uninterrupted service to its customers. The company has enlisted Kirkland & Ellis LLP as legal counsel, Moelis and Company LLC as investment banker, and AlixPartners as restructuring advisor. Meanwhile, the Ad Hoc Lender Group is represented by Akin Gump Strauss Hauer & Feld LLP, with Perella Weinberg Partners LP serving as financial advisor.

Expert insight: a transformative moment for ATD

Industry experts view this asset purchase agreement as a pivotal moment in ATD’s history. The combination of a $1.3 billion debt reduction strategy and enhanced financial flexibility improvement positions ATD to emerge stronger and more competitive in the replacement tire market. However, the competitive sale process will ultimately shape the company’s path forward.